Luminati Networks Ltd., a provider of a cloud service that connects devices over the Internet though a proxy-based network, recently filed a patent infringement complaint against BI Science Inc., both Israeli companies. Luminati, formerly known as Hola Networks Ltd., offers proxy-based services via its “Residential Proxy Network” that enables data access over the Internet using residential IP addresses from various locations. According to Luminati, utilizing the residential IP addresses provides customers with a number of advantages, including enabling anonymous price comparisons and website testing from nearly any city in the world. Luminati alleges that BI Science, founded in 2009, provides a residential proxy service, via its “GeoSurf” brand, that infringes on two related patents covering Luminati’s proxy-based services. Luminati has also alleged tortious interference with Luminati’s employment agreement as well as trade secret misappropriation.

In Luminati’s complaint, filed in the Eastern District of Texas on November 8, 2018, Luminati claims that the two asserted patents are directed to fetching content over the Internet using intermediary tunneling devices. The two patents-in-suit, originally assigned to Hola, claim priority back to 2013. Not surprisingly, additional patent applications are pending in the family, two of which were filed as recent as September 2018. Notably, Luminati also filed a complaint in July in the Eastern District of Texas against UAB Tesonet alleging patent infringement of the same two patents.

In the complaint, Luminati includes paragraphs of factual allegations relating to meetings and communications from 2014 to 2018 between Luminati and BI Science founders, Kfir Moyal and Assaf Tval. In particular, Luminati alleges that BI Science decided to provide a residential proxy service as early as May 2017, as opposed to its server-based service, after becoming aware of Luminati’s patent applications and commercial success related to its residential proxy service. In particular, according to Luminati, Kfir Moyal purportedly conducted technical due diligence on behalf of an investor shareholder (iAngels) with access to Luminati’s confidential information and intellectual property as well as sought information and tested Luminati’s residential proxy service as a supposed customer, all prior to BI Science providing its own residential proxy service.

With regard to the allegations directed to tortious interference with Luminati’s employment agreement and trade secret misappropriation, the complaint provides factual allegations related to three former employees of Luminati that had entered into an employment agreement with Hola at various dates in late 2014 and early 2015. The employment agreement purportedly includes a confidentiality provision and a non-compete clause prohibiting employment at a company with a competing service within twelve months of the termination of employment with Luminati. Luminati further specifies that BI Science hired these three individuals within months of their employment termination with Luminati. Luminati contends (1) BI Science knew or should have known that hiring the former Luminati employees to sell BI Science’s competing GeoSurf service caused the three individuals to violate the non-complete clause of their respective employment agreements and (2) hiring the former Luminati employees knowing that each had access to Luminati’s trade secrets and a duty to preserve the confidentiality constitutes misappropriation of Luminati’s trade secrets.

Although BI Science has not yet filed an answer, BI Science will almost certainly attack the validity of the asserted patents under 35 U.S.C. §§ 101 and 102/103, as did the defendant, UAB Tesonet, in its answer, filed on November 21, 2018, to Luminati’s complaint related to the same two patents. While BI Science will likely attack the tortious interference of Luminati’s employment agreements and trade secret claims, it will be interesting to see how these claims asserted by Luminati play out as well as related trends. In particular, while more trade secret misappropriation claims may exist in cloud computing patent infringement cases, Luminati’s particular trade secret misappropriation claims appear to be more directed to the misappropriation of client and marketing data as opposed to the technical details of the technology at issue. As sales and services play a big role in cloud computing, it would not be surprising if more cloud computing patent infringement cases allege trade secret misappropriation claims in relation to employees hired into sales or services positions. Further, with an increase in trade secret misappropriation claims, we can likely expect to see more allegations of tortious interference with employment agreements.

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Kelly's practice includes assisting clients in many aspects of intellectual property law, with a particular emphasis in patent-related matters. Her patent procurement experience includes preparing and prosecuting U.S. and international patent applications in various areas including computer software, telecommunications, pharmaceutical, medical device, mechanical and chemical arts. Kelly counsels clients in many aspects of intellectual property law and provides patentability, validity and infringement opinions. She also conducts intellectual property portfolio analyses to assist clients with evaluating possible acquisitions of third-party patent portfolios and patent cross-licensing opportunities. Kelly's experience further includes trademark prosecution and involvement in various intellectual property litigation matters.